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The Fundraising Toolchest

Posted on Friday, April 23, 2010 at 3:26PM by Registered CommenterJeff | Comments61 Comments

There’s a saying in business that “time kills deals” and I’ve found this to be generally true – the longer it takes something to get done, the more likely it is that it’s just not going to happen.   When raising money, one of the things you can do as an entrepreneur is to be as responsive as possible.

To do so, I try to have a number of things ready to go from the outset.  The idea is that you’re going to start by providing some limited information and overview of your opportunity, and gradually work into more detail and depth.  You don’t want to unload all of your information at once, you want to tease the potential investor into wanting more.  It’s simple human nature that you’ll pay more attention to something you’ve decided for yourself that you are interested in, and so you want to generate that interest first, provide the detail later.

So, from start to finish, here’s a list of some of the tools that I use:

-       Target list:  You want to make a list of the potential investors you’re going to call, familiarize yourself with the partners, their investments, and their funds history before you make the call.

-       Voicemail Script: Write a very short (30-45 seconds) pitch you can leave via voicemail.  You will probably not get a call back, but you want to quickly state who you are, why you’re calling, let them know that an email is en route with more info, and ask for a meeting.   You don’t want to ad lib this on the fly, because you’ll miss something and need to call back.  This will cause you to look unprofessional and unpolished, so write it down first.

-       E-Teaser:  This is a short email, essentially two very short paragraphs that again tells the story of what you do and why you think that investor would be interested.  You’re still just trying to get a meeting or get them to ask for more info.

-       At-A-Glance: This is a document you can think of as the back of your company’s baseball card – quick stats that might answer a few questions.  I put things like “Year Incorporated:” “Number of employees:” “Revenue (if any):” “Business type: (Delaware C-Corp, etc)”.  Here you are trying to provide nothing more than a sense of where the company is today so that there is a frame of reference for the investor when they talk to you.  This is a PDF I’d send to them if I get some kind of initial response – for example if they agree to schedule a meeting, then send this to them to keep them thinking about you ahead of that meeting.

-       Opportunity Overview: This is a document that is essentially your executive summary from a business plan.  I don’t call it an executive summary because thinking of it as an overview of the investment opportunity will help get you in the right frame of mind when writing it.   You want to deliver the same basic information you would expect from a business plan, but you need to organize and deliver it in a way that answers the questions of the investor.  Shoot for one page, and settle on the fact that it will probably be 2-3 pages long, but you are looking to cover what you do, the target customer, the pain you solve, the history of the founding team, and what kind/size of investment you are looking for.  Don’t over do it or it will be far too lengthy – if you were making a movie this would be the movie trailer – it paints the picture, hits on the target audience, but doesn’t blow the plot.  This is a good doc to send two days or so ahead of that first meeting.

-       20 Minute Investor Presentation: I’ve hit on this before, and I made a short video (which needs some updating) about How to Pitch an Investor in the past.  Check that out for an overview of content and organization.

-       Financial Model: This is the excel spreadsheet version of your business plan, probably going out 3 years on a monthly basis, and covering your P&L, balance sheet, and cash flow projections.   This will take you quite some time to put together, but hopefully you started your investigation here when considering starting a business, and you’ve been working on it over time.  This is something I share with potential investors after that first meeting if they ask for it, or after the second meeting for sure.  As discussions get more serious, they’ll want to see how you intend to spend the investment money, what assumptions went into the model, and what the risk points are to achieving success.

-       Technology Presentation: If you are a company with some kind of technological advantage or idea, you’ll want to prepare a 20 minute overview that covers the details of your technology and how it fits in the marketplace.  If you get to the point in the discussions where an investor wants to dive into this detail then you are making good progress toward a term sheet.   Offer this when asked for more technology detail.

-       Thank You Email:  You’ll want to send a thank you email after you give a presentation.  If you are pursing your fundraising correctly, you’ll be having lots of meetings and won’t want to start with a blank slate every time you want to write one of these.  Draft a short and sweet message, and edit it as need be, but it’s a good opportunity to drive home your points again, so long as you do so in a sentence or two.

-       Business Plan: Ah, the business plan – loved by some, hated by many.  Do you need a full blown business plan?  No, not really, at least not in the classic sense of the business plan document.  What you need is all the stuff above.  However, the reason to write a business plan is because it’s a lot easier to write a long, lengthy overview of your business than it is to write all of the above.  So in reality, you want to start here (and with the excel financial model), and then extract all of the above from the messaging here.  When an investor asks for a business plan, I normally do not send them this.  Instead, I’d send them the Opportunity Overview and the financial model.  Even then, I would not do that until after we’ve had a meeting, and by the end of that meeting, they should know everything you’d stick in a plan anyway.  In most cases, the true “business plan” document never makes it out of draft mode for me – it’s a document used for brainstorming and organizing my thoughts, such that I can extract the pieces above.

Over the course of pitching, you may find it useful to put together some ancillary documents that cover common themes and questions that come up.  Maybe a page of frequently asked questions (again, keep it short), or a document that compares you to a specific competitor.  These are things than can be circulated (usually) in the post-Opportunity Overview stage. 

There’s a little bit of art to knowing when to send each document, such that you stay top-of-mind for those potential investors, and there is no absolute right or wrong way to do it.  What you don’t want are big gaps between when the investor hears about you, and what you do want is to have them thinking about you even when you aren’t right there in front of them.  Hopefully this list will get you started thinking in the right direction, and having this all prepped before you start will go a long way toward moving things along quickly, and looking professional.  

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Reader Comments (61)

How many potential investors do you plan to talk to in a given round of funding? What percentage of your list actually respond?...result in a meeting?...follow-up meeting?...and on down the funnel before you close the round. Just curious about your stats and what to expect as a first time entrepreneur.

April 23, 2010 | Unregistered CommenterCraig

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